The Third Way


The greatest misunderstanding in markets currently is that CDS will suddenly be traded on an open CCP platform.


There is a very common misconception that ccp clearing also means open trading. The CDS community have banded together in what might call a typically opaque fashion to avoid at all costs their cash cows being commoditised and left open – horrors! – to the prospects of being traded as cheap commoditised instruments on exchanges. Who frankly can blame them for acting in their best interests?

That is not to fault EUREX or LIFFE or any exchange from trying to create an exchange-based solution. However, the evidence is that a relatively opaque “adults only” clearing situation from the likes of ICE will be the solution that prevails unless or until the regulators force the opening up of the OTC CDS market into a transparent xchange product.

The Creditex acquisition was indeed an inspired one as this move from ICE demonstrates…


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